India’s retail inflation eases to 1.54% in September, lowest in over 8 years

India's inflation for September

Inflation cooled to 1.54 percent in September, the lowest reading in more than eight years, easing from a two-month high of 2.07 percent in August, data released by the government on October 13 shows.

"The CPI inflation eased to a 99-month low 1.5 percent in September 2025, pulled down by a sharper than anticipated disinflation in food and beverages to 1.4% (81-month low), despite several other categories recording a sequential uptick in YoY inflation prints. For instance, inflation for miscellaneous items shot up to 5.35 percent in September 2025, boosted by the surge in prices of gold and silver," said Aditi Nayar, chief economist, Icra.

This is the second time in 2025 that consumer price growth has stayed below 2 percent, marking a continuation of the disinflationary trend seen through the year. In August, inflation dipped to an eight-year low of 1.61 percent, driven by a fall in food and fuel prices.

The food basket in September slipped further into deflation with a reading of -2.28 percent, lowest level in over eight years, as vegetables and pulses remained in deflation at -21.4 percent and -15.3 percent, respectively, for an eighth consecutive month.

On the other hand, personal effects inflation rose further to 19.4 percent, its highest reading since the start of the series from 16.7 percent in the previous month. Gold and silver prices have touched new highs in October.

The latest reading suggests price pressure is likely to remain subdued, with goods and services tax (GST) rationalisation expected to keep prices in check in the coming months as well. An earlier analysis by Moneycontrol found that the GST cut is likely to effect at least 14 percent of the inflation basket.

Earlier this month, the Reserve Bank of India (RBI) revised its inflation forecast downward to 2.6 percent for FY26, from 3.1 percent earlier, citing better-than-expected supply conditions and easing cost pressures.

"With the Sep print in line with our expectations, we view risk of a further undershoot of ~30-40bps in RBI’s FY26 headline inflation forecast of 2.6 percent, after having been revised down fourth time in a row in Oct MPC meeting," said Madhavi Arora, Madhavi Arora, chief economist, Emkay Global Financial Services.

"The recently implemented GST rate rationalisation would lead to a reduction in prices of several items in the CPI basket. Overall, the inflation outcome is likely to be softer than what was projected in August, primarily on account of the GST rate cuts and benign food prices," RBI governor Sanjay Malhotra said on October 1.

With inflation well below the RBI’s medium-term target of 4 percent, analysts expect policymakers to continue focusing on supporting growth. Economists have penciled in another 25 basis point rate cut in the December meeting. The RBI has cut rates by 100 bps since the start of the year.

"We expect the CPI inflation to average 2.6% in FY2026, dampened by the GST rationalisation as well as the continued benign food prices. ICRA believes that a final 25 bps rate cut is possible in December 2025, with its timing contingent on the degree of further transmission of the cumulative 100 bps rate cuts to the credit market as well as growth implications of GST rejig and tariffs," Nayar added.